COVID-19 impact on Transportation and Logistics has been tremendous, and the industry’s response to this disruption has been mixed.

On a positive note, Transportation and Logistics (T&L) players were able to manage the imbalance of supply and demand of essentials like grocery and medical supplies by repositioning their supply chain network or resources. Online transaction volume increased by 25-30% and is expected to further increase up to 50%^[1]. This has helped unemployed workers to switch jobs to handle the volume surge.

The disruptions at factories and warehouses due to lockdowns have created a supply surplus in transportation and warehousing capacity. Global freight forwarding market is expected to contract by 7.5% in 2020, compared to previous year^[2]. Ocean freight volume contraction led to shipping line blank sailings, port calling, delayed orders, waiver of demurrage and detention charges at ports etc. Due to travel restrictions, air cargo faced capacity challenges resulting in rates increase. No output from factories created bottlenecks for surface transport. Efforts to reduce virus spread and changing customer behavior created surge in online orders, resulting in labor shortage and change in fulfilment model. We see imbalance in supply and demand as the outcome.

To minimize disruptions in global trade, industries are augmenting product offerings, operations, and processes across the value chain. T&L players will have to reposition their supply chain networks, service offerings and logistics operations in four dimensions to cope up with these changes in mid to long term.

COVID-19 response: The 4 focus areas

Manage supply-demand using cognitive supply chains – To mitigate risks, transportation players need to reposition their supply chain network by identifying key suppliers, alternate suppliers, transport lanes, distances and lead times for visibility. Supply chain visibility and risks across the network, given the pandemic scenario, requires a confluence of short-term predictions with artificial intelligence and machine learning to create models for predictions to handle future crisis.

Reimagine operations for “new normal” ways of working – The new normal will require operations to be adjusted/regulated at distribution centers /hubs to minimize physical contacts, handle labor shortages and improve efficiencies to make products available at the right place at the right time. Implementing goods-to-person concept or robotics-based picking will help in near touchless operations to handle inventory/packages. Rise in e-tailing will require switch in processes at warehouses to enhance order fulfilment capabilities for each picking as we enter tomorrow. Forwarders will need to focus on building capabilities to leverage digital platforms to find alternate carriers and route for timely deliveries and at the same time reduce shipping cost. Being digital-savvy and going paperless will help them post COVID-19.

Create new offerings to handle demands – As consumer behavior changes post COVID-19 and amid uncertainty, major industry players will change services and offerings. This will require transportation players to support their customers with new offerings and delivery models. New offerings will have to focus on handling capacity by resource maximization, reducing cost by improving assets utilization, and improving efficiency by route optimization. Deliveries will have to reimagine eliminating contacts with customer while delivering at home, giving an option to order online and pick-up package at the curbside, or drone or automated guided vehicle based delivery. The focus on capacity, cost and efficiency will help in first/last mile and line haul demands.

Ensure safety for community – Enterprises will scale safety of employees and customers to prevent community spread and ensure business continuity. Considering employee safety, there will be process redesign for effective control of disease spread. Social distancing, temperature screening and digital inspection will be new precautionary checks at DCs/hubs. Drivers will be digitally empowered to take safety measures while entering an impacted area^[3]. Considering customer safety, there will be service re-design to provide online/contactless offerings.

The new normal in customer relationships

In such unprecedented times, Transportation and Logistics players’ strategic intent and objective should be to help their customers in minimizing the impact of disruptions to sustain long-term relationships, and be the ultimate partner of choice. Providing differentiated offerings, building digital skills coupled with industry experience and niche partnerships can help achieve this strategic intent.

References

^{[1]& [2]} Statista Research Department

^[3]https://www.transportation.gov/coronavirus

Ashok Bafana
Consulting Partner & Global Transportation & Logistics Consulting Practice Head at Wipro

Ashok is responsible for shaping transportation solution strategy, process consulting, package consulting and providing thought leadership in 3^rd Party Logistics, Parcel Logistics and Freight Forwarding areas. Ashok, with 17+ years of experience, has managed consulting engagements, transformation programs and global implementations for leading logistics and retail players across geographies.